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South Africa’s Finance Minister faces fraud charges, currency plunges

This file photo taken on February 24, 2016 shows South Africa's Minister of Finance Pravin Gordhan (C), walking out from the Finance Ministry with officials up to the South African Parliament to deliver the 2016 Budget Speech, in Cape Town. South African Finance Minister Pravin Gordhan will be prosecuted for fraud over alleged misconduct when he was head of the South African Revenue Service (SARS), officials said on October 11, 2016, in a move set to shake the country's fragile economy.


South Africa's prosecuting agency has launched a criminal case against the country's respected Finance Minister, triggering a currency plunge and deepening the power struggle between President Jacob Zuma and his opponents.

The fraud charges against Finance Minister Pravin Gordhan, announced on Tuesday, are widely seen by analysts as an orchestrated effort to create a pretext to remove him from office. An anti-corruption crusader, Mr. Gordhan has fought against lucrative contracts and insider deals that would benefit Mr. Zuma's family and business cronies.

The charges involve the relatively trivial issue of a retirement package for a civil servant in 2010. Prosecutors acknowledge that there was no allegation of corruption or self-enrichment in the case, and South African media have reported that there have never been criminal charges filed for a similar case in the country's history.

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South Africa's currency, the rand, plummeted by more than 3 per cent after the charges were announced, and South African banks immediately lost nearly $3.5-billion (U.S.) in their value on the Johannesburg Stock Exchange, where the banking index fell by 5 per cent.

Mr. Gordhan confirmed that he has been summoned to appear in court on Nov. 2 after an investigation by a controversial police unit known as the Hawks. "South Africans must ask who the Hawks are really serving," he told reporters. "Where are they getting their instructions from?"

Several top officials of Mr. Zuma's ruling party, the African National Congress, immediately jumped to Mr. Gordhan's defence, calling him "honest" and "ethical." It was a sign of the growing divisions in the ANC as the party debates what to do about the embattled President.

One opposition party, the Democratic Alliance, said the charges against Mr. Gordhan were a "disaster for the economy." Another opposition party, the Economic Freedom Fighters, called on its members to "occupy the streets" in support of Mr. Gordhan when he appears in court next month.

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A key alliance partner of the ANC, the South African Communist Party, said the charges against Mr. Gordhan were "a pretext to have him removed from office and weaken the National Treasury's struggle that he is leading against corruption."

Mr. Zuma has been under mounting pressure to resign after South Africa's highest court found that he had violated the constitution by refusing to pay back the state funds that were used for his personal benefit at his private home.

He also faces corruption charges in connection with a multibillion-dollar arms deal – charges that were dropped by prosecutors shortly before his 2009 election. South African courts reinstated the charges this year.

The South African Public Protector, an ombudsman who investigates corruption, is investigating allegations that Mr. Zuma encouraged "state capture" by allowing his business allies, the Gupta family, to win control of key government ministries and state enterprises. The Public Protector, Thuli Madonsela, has been questioning Mr. Zuma in connection with the case, and has promised a preliminary report by Friday.

The ANC suffered major losses in local elections in August, and many party veterans have urged Mr. Zuma to step down. His presidential term ends in 2019, but he could be replaced as ANC leader at the party's next conference late next year.

Instead of resigning, Mr. Zuma is reported to be planning a cabinet shuffle to get rid of Mr. Gordhan and replace him with a more pliant minister. The Finance Minister has resisted the Gupta family in its campaign to win contracts in coal mining, nuclear energy and other fields.

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Mr. Gordhan's predecessor, the equally respected Nhlanhla Nene, was fired by Mr. Zuma last December, also triggering a plunge in the currency and the stock market. He was replaced by an unknown political novice for three days, until a party rebellion forced Mr. Zuma to replace him with Mr. Gordhan, who managed to stabilize the markets.

One economist, John Ashbourne of Capital Economics, said the criminal charges against Mr. Gordhan have created a "self-inflicted crisis" for South Africa.

"If President Zuma does succeed in removing another respected Finance Minister, we expect that the rand will continue to fall sharply," he said in an analysis on Tuesday.

The charges against Mr. Gordhan "suggest that the struggle for power within the ANC may continue to throw up turbulence for South Africa's already weak economy," he said.

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About the Author
Africa Bureau Chief

Geoffrey York is The Globe and Mail's Africa correspondent.He has been a foreign correspondent for the newspaper since 1994, including seven years as the Moscow Bureau Chief and seven years as the Beijing Bureau Chief.He is a veteran war correspondent who has covered war zones since 1992 in places such as Somalia, Sudan, Chechnya, Iraq and Afghanistan. More


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